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Van Buren municipal employees may face higher insurance premiums

Van Buren municipal employees, including police officers and firefighters, could face increasing costs associated with health insurance for spouses and dependents when next year's city budget is created following a rate increase for the city.

The rate increase first came to light during May's city council meeting, when Freeman told city aldermen that the city's municipal health insurance had increased in cost by $133,596 annually, or $11,133 per month. The city's health care plan covers 148 people. No action was taken at the meeting, though Freeman has made a recommendation to the council of increasing the amount paid by city staff to cover for dependents. The city now covers 100% of the premiums for staff and dependents.

While many insurance plan providers have blamed rate increases on the Affordable Care Act, Freeman said the city's increase is simply due to a few catastrophic claims by covered individuals.

To highlight the point, Freeman points to premiums paid by the city of $711,560.10 from Nov. 1, 2013, to April 30, 2014. During the same period, claims paid for individuals covered under the plan amounted to $959,112.94. Incurred but unreported claims amounted to $159,855.35.

In all, the total loss reported by the Municipal Health Benefit Fund for the city was $1.14 million, which amounts to a loss ratio of 160.26%. It was that loss ratio that pushed Van Buren into a higher risk class with the MHBF, resulting in the higher premiums.

Freeman said the city will cover the increase out of reserve funds, but he said it is not sustainable for the long term.

"You come to a certain point that you go, ‘Well, it's been great that the city has always paid for employees and their families 100%.’ But as rates have increased and as the city has grown its employees, those increases in stages go up exponentially. So at some point, yeah, as they continue to go (up), we are going to have to say OK, where's our stopping point? Because we can't continue to absorb this. It's going to cause problems."

The only real way to have the city's premium drop is to have the number of claims go down to where the loss ratio would even out.

According to Arkansas Municipal League Executive Director Don Zimmerman, that has happened for 39 cities across Arkansas last year that take part in the AML's health benefit fund.

"We've got six classes of rates," he said. "Cities work their way up or down depending on their own utilization, as well as utilization of the group."

One way to help reduce the number of claims would be for the city's insured to take part in a wellness program in hopes that it would be a preventative measure.

Another way to try to save the city money is to look elsewhere for coverage, as suggested by Alderman Max Blake.

Freeman said Arkansas Blue Cross and Blue Shield is preparing a quote for the city, though it is unknown at this time whether the provider could give the city lower rates.

While neither Freeman or Zimmerman blamed the ACA for the rate increase on Van Buren and the 22 other cities across the state that saw increases, Zimmerman did say that the health plan was hit with higher fees this year.

"Overall, the impact on our plan is a 1% increase overall. That's the largest increase we've had in seven years. …I think that's got more to do with (catastrophic events), although the new (law) has required some things we had not had to have before such as unlimited caps and adult age dependents to age 26."

Such moves increases risk, Zimmerman said.

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Freeman said even if the city gets a better rate from Blue Cross, the city could still stay on the Municipal Health Benefit Fund plan since it does not know whether the rates will stay lower in the long term.

"…that has happened with some municipalities, being part of the Municipal League System, we've seen that happen with some municipal governments where they've switched to somebody and then a year or two years later, they're right back because who they switched to really came in and underbid to get the business and I don't want to do that. I want to make sure we have a good provider and we're not just making a silly decision, I guess you could say."

Whatever happens, Freeman said something must be done and his recommendation to the city council will be limiting in some way how much the city pays for dependent coverage.